Bitcoin and Permissionless Innovation

PublishedMarch 19, 2014

It’s a platform.

When I started this website, I didn’t need to ask anyone’s permission. An enabling platform was already in place. The platform consisted of the Internet, the World Wide Web, and many pieces of open source software. All I needed to do was download the latest version of WordPress, rent some space on a web server, and I was off to the races.

The key element, of course, is an open, accessible platform that facilitates innovation. In my case, the platform is a collection of Internet-based technologies. Other permissionless innovation platforms include the interstate highway system, the human genome project, and the public school system. The trick is to provide a platform that anyone can use without prior permission.

I thought about this as I was reading up on Bitcoin. I’ve written about Bitcoin as a currency (here and here). One of my intrepid readers, John Ball, suggested that I’m probably missing the essence of what Bitcoin is all about. John, who understands the technology better than I do, suggests that Bitcoin is a permissionless innovation platform. Here’s what he has to say:

“… Bitcoin has little to do with currency, and everything to do with a protocol and trusted ledger. I suspect we may see multiple ‘digital currencies’ just as we see multiple email systems. However, the concept of peer to peer transactions freed from the tolls of large intermediaries like Visa, Western Union, and First Data, is here to stay and will continue to grow.” (John’s entire comment is here. Just scroll down.)

With Visa, Western Union, or First Data, we have to ask permission and pay fees to use their proprietary system. Similarly, in the early days of software, developers had to ask permission and pay fees to run their programs on proprietary computers. With the advent of open operating systems like Unix, software developers no longer had to ask permission. They simply wrote to the open software platform. As a result, software blossomed and hardware became a commodity.

As John suggests, the same thing seems to be happening in the world of crypto-currencies. John predicts that we’ll see multiple digital currencies. He’s right. In fact, it’s already happening. You can use another permissionless innovation platform called Google to find: Peercoin, Dogecoin, Namecoin, and others. As far as I can tell, all of these are built on the Bitcoin platform. If I had better programming skills, I could create my own currency. Let’s call it Travis Tender.

While Bitcoin (the currency) has certainly had some PR mishaps lately, Bitcoin (the platform) is just starting to blossom. In fact, we might say that Bitcoin is to currency as Unix is to proprietary computing. If so, we’re about to see a wave of innovation that will make the original Bitcoin seem quaint.